Problems
21 . Name several forms of indexing in the private and public sector.
Critical Thinking Questions
22 . rates, like most statistics, are imperfect measures. Can you identify some ways that the rate for fruit does not perfectly capture the rising of fruit? 23 . Given the federal in recent years, some economists have argued that by adjusting Social Security payments for using the CPI, Social Security is overpaying recipients. What is their argument, and do you agree or disagree with it? 24 . Why is the not an accurate measure of as it impacts a household? 25 . Imagine that the government statisticians who calculate the rate have been updating the basic basket of goods once every 10 years, but now they decide to update it every five years. How will this change affect the amount of and ? 26 . Describe a situation, either a government policy situation, an economic problem, or a private sector situation, where using the CPI to convert from nominal to real would be more appropriate than using the . 27 . Describe a situation, either a government policy situation, an economic problem, or a private sector situation, where using the to convert from nominal to real would be more appropriate than using the CPI. 28 . Why do you think the U.S. experience with inflation over the last 50 years has been so much milder than in many other countries? 29 . If, over time, wages and salaries on average rise at least as fast as inflation, why do people worry about how inflation affects incomes? 30 . Who in an economy is the big winner from inflation? 31 . If a government gains from unexpected inflation when it borrows, why would it choose to offer indexed bonds? 32 . Do you think perfect indexing is possible? Why or why not?
Problems
33 . The representing the level changes from 110 to 115 in one year, and then from 115 to 120 the next year. Since the increases by five each year, is five the rate each year? Is the rate the same each year? Explain your answer. 34 . The total of purchasing a basket of goods in the United Kingdom over four years is: year 1=£940, year 2=£970, year 3=£1000, and year 4=£1070. Calculate two indices, one using year 1 as the (set equal to 100) and the other using year 4 as the (set equal to 100). Then, calculate the rate based on the first index. If you had used the other index, would you get a different inflation rate? If you are unsure, do the calculation and find out. 35 . Within 1 or 2 percentage points, what has the U.S. inflation rate been during the last 20 years? Draw a graph to show the data. 36 . If inflation rises unexpectedly by 5%, indicate for each of the following whether the economic actor is helped, hurt, or unaffected: a. A union member with a COLA wage contract b. Someone with a large stash of cash in a safe deposit box c. A bank lending money at a fixed rate of interest d. A person who is not due to receive a pay raise for another 11 months 37 . Rosalie the Retiree knows that when she retires in 16 years, her company will give her a one-time payment of $20,000. However, if the inflation rate is 6% per year, how much buying power will that $20,000 have when measured in today’s dollars? Hint: Start by calculating the rise in the price level over the 16 years.
FIGURE 10.1A World of We are all part of the global financial system, which includes many different currencies. (Credit: modification of " from around the world" by Images /Flickr, CC BY 2.0)
In this chapter, you will learn about:
- Measuring Trade Balances
- Trade Balances in Historical and International Context
- Trade Balances and Flows of
- The National Saving and Investment Identity
- The Pros and Cons of Trade Deficits and Surpluses
- The Difference between Level of Trade and the
BRING IT HOME More than Meets the Eye in the Congo How much do you interact with the global financial system? Do you think not much? Think again. Suppose you take
Text from Principles of Macroeconomics 3e, OpenStax, licensed CC BY-NC-SA 4.0. Access for free at openstax.org.
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